Debt Ceiling Negotiations: Time for Real Spending Cuts and Not Tax Increases
July 8, 2011
New unemployment numbers were released today (July 8) and the bad news is that the unemployment rate jumped to 9.2 percent. This number was released smack dab in the middle of the negotiations on raising the debt ceiling and just 48 hours before a rare Sunday meeting between members of Congress and the President as they try to hammer out a deal on raising the debt ceiling. Fiscal conservatives are staking their ground by insisting on spending cuts without tax increases while others keep the door open to tax increases. Rumors have been leaked about Republicans accepting a deal that would include an increase in revenues. Now is not the time to burden the taxpayers with more taxes. That is why it is imperative to tell your member of Congress to stop the over spending and demand real spending cuts and no tax increases. Call the main switchboard of the Capitol at 202-224-3121.
With a $14.3 trillion debt, a projected deficit of $1.5 trillion, and unemployment at 9 percent (and climbing), Americans are well are of the impending financial crisis. On June 21, the Congressional Budget Office (CBO) issued it’s “CBO’s 2011 Long-Term Budget Outlook,” and confirmed the fears of many Americans, the country is broke. According to CBO, “With significantly lower revenues and higher outlays, debt held by the public would exceed 100 percent of GDP by 2021. After that, the growing imbalance between revenues and spending, combined with spiraling interest payments, would swiftly push debt to higher and higher levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2023 and would approach 190 percent in 2035.”
And, instead of addressing real spending cuts last year, Congress passed one of the biggest expansions of government with Obamacare, and along with it, the Independent Payment Advisory Board (IPAB), a panel of 15 “experts” to slow the growth of Medicare. IPAB will be a board of 15 unelected members who, according to the American Medical Association, would “extend Medicare solvency and reduce spending growth through the use of a spending target system and fast-track legislative approval process.” In reality IPAB will be nothing more than a way to ration health care for seniors.
According to Phil Gingrey (R-Ga.), “But under this IPAB we described that the Democrats put in Obamacare, where a bunch of bureaucrats decide whether you get care, such as continuing on dialysis or cancer chemotherapy, I guarantee you when you withdraw that the patient is going to die.” Republicans aren’t the only ones worried about IPAB. According to Politico, “A handful of Democrats have also signed onto the bill out of concerns the board will weaken congressional authority over Medicare.”
Spending cuts must be the top priority to get our fiscal house in order and CBO warns us if we don’t take action, “Growing debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates. Such a crisis would confront policymakers with extremely difficult choices. To restore investors’ confidence, policymakers would probably need to enact spending cuts or tax increases more drastic and painful than those that would have been necessary had the adjustments come sooner.”
Here are a few suggestions on where to find spending cuts. Let’s start with the Congressional Budget Office (CBO), which detailed a number of spending cuts in its March 2011 report, “Reducing the Deficit: Spending and Revenue Options.“ The cuts are broken up into three categories: Mandatory – savings would total $29 billion in one year and $590 billion over five years; Discretionary (Defense) – savings would total $10 billion in one year and $178 billion over five years; and Discretionary (All Discretionary Activities Other Than Defense) – savings would total $13 billion in one year and $147 billion over five year. All told, savings would exceed $900 billion over five years.
Budget Committee Chairman Paul Ryan (R-Wisc.) offered his plan, “The Path to Prosperity: Restoring America’s Promise” which cuts $6 trillion in spending over the next decade and saves Medicare.
Even President Obama offered some spending cuts. On February 14, 2011 President Obama released his fiscal year (FY) 2012 budget he estimated a total spending level for FY 2012 of $3.7 trillion and a deficit of $1.6 trillion. In conjunction with the budget, President Obama released his Fiscal Year 2012 Terminations, Reductions, and Savings list which outlines $33 billion in potential spending cuts. While there are some good recommendations to cut spending, the total amounts to less than one percent of the $3.7 trillion budget and it fails to address entitlement spending, which is projected to be 64 percent of the budget.
Last year the National Commission on Fiscal Reform and Integrity, a deficit reduction effort led by former White House chief of staff Erskine Bowles and former Republican Senate Whip Alan Simpson (R-Wy.), released a report on potential spending cuts. The $2.2 trillion in savings from spending cuts by 2020 is arranged by loose categories such as Leading by Example; Cut Outdated, Low Priority, and Under-Performing Programs; Securing a Better Return on Taxpayer Investment; Getting Full Value for Federal Resources; and Creating a Leaner, More Efficient Defense Department.
There is not a lack of ideas on where to cut spending, there is a lack of courage to institute real spending cuts. As members of Congress and the President get together over the weekend and talk about the debt ceiling it is imperative that they agree on real spending cuts and not tax increases. All Americans need to call their members of Congress now to remind them that any tax increase will hurt the economy. Another increase in the debt ceiling will mean that America’s children and grandchildren will be saddled with more debt.